Economic and Fiscal Outlook Peter R. Orszag Citigroup
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Economic and Fiscal Outlook
Peter R. OrszagCitigroup
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• Recoveries tend to be sluggish following financial crises– In 2007, private sector borrowing was 28% of GDP; in 2009
it was -17% of GDP– The peak unemployment rate is reached from three to ten
years after the crisis• Housing is a key transmission mechanism
– Median housing prices are 15 to 20% lower in the decade after a crisis compared to pre-crisis levels
– Feedback loop: weak economy weak housing weak economy
• Political Polarization in the United States– Not caused by gerrymandering– Inertia does not lead to good outcomes (fiscal, climate,
etc.)– Learn to function with gridlock
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Components of Growth
3/2006
6/2006
9/2006
12/2006
3/2007
6/2007
9/2007
12/2007
3/2008
6/2008
9/2008
12/2008
3/2009
6/2009
9/2009
12/2009
3/2010
6/2010
9/2010
12/2010
3/2011
6/2011
-10
-8
-6
-4
-2
0
2
4
6
Inventories Recovery ActNon-Inv, Non-Recovery Act Real GDP Growth
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19701972
19741976
1978
1979/r1981
19831985
1987
1989/r1991
19931994
19961998
20002001
2002/r2004
2005
2006/r2008
20090
0.5
1
1.5
2
2.5
3
Homeowner Vacancy Rate, Single Units
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Employment-Population Ratio
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2012 2013 2014 2015 2016 2017 2018 2019 2020 20210.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Federal Deficit as % of GDP (CBPP policy assumptions, different economic assumptions)
CBO official economic as-sumptions
2.25 percent average growth
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Medicare Spending Per Beneficiary by HRR, 2006
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